Sipp Confusion

SeniorSam

I'm not very clued up on pensions and would appreciate some clarifiation on my SIPP please.

Age 74, not contributed to pensions for some years, but have some earned income (£11.5k - £9k - £12.5k last 3 years) that varies each year but may stop soon. My Sipp has been partially crystalised, approx 30% and have taken TFC from that but not started drawdown, as have State pension and investments to manage with.

If I were to start taking drawdown, can I then invest more into my Sipp and 'effectively' top up the uncrystalised side of the Sipp?

Sam

atush

You should be able to, your provider permitting.

But you would be limited to 10K per annum

redbuzzard

If the crystallised part is in capped drawdown, and you are only taking benefits from that, then I think you can add to the uncrystallised part and keep your 40k AA.


Once you crystallise the next bit and take any TFLS or drawdown, your AA will drop to 10k, if I have understood correctly.

SeniorSam

Atush ....... I thought that my limit this year would be based on the current year's earned income and not per annum, as my earned income varies each year?

redbuzzard ....... can you please clarify? My thought's are to add to the uncrystalised SIPP. What is the 40k AA?

Triumph13

You'd better get your skates on as (unless I missed a rule change) only contributions made before your 75th birthday attract tax relief.

redbuzzard

Sam - Annual Allowance. But you are right, you are also limited by your earned income.

My understanding though is that withdrawals under capped drawdown do not affect your AA but new capped drawdown accounts will not be allowed after 5 April - on any uncrystallised funds, you would either have to use UFPLS (taking successive withdrawals of which 25% is tax free) or put it into flexi-access drawdown. In either case, taking any benefits, including TFLS, will reduce the AA, though that might not matter to you. I only mentioned it because it seemed to expand on atush's answer.

Good point about tax relief over 75 though - I think it was mooted to allow it but it seems to have been dropped.

Don't you use HL, or have I misremembered? Their SIPP department can reel this off for you.

E&OE - it's early!

atush

I had thought you had only taken part of your TFLS. If you have been taking any income from it under a cap, yes you would still have up to your earned income or 40K whichever is the lower.

But you were not clear in how you have taken money from your sipp so far. So just TFLS, 10K, but if in capped DD already, you have 40K.

SeniorSam

I only transferred £100k to uncrystalised and took the £25k TFLS. No drawings have been taken from the uncrystalised pot at all so far.

Can I carry forward unused allowances on earlier years earned income, or am I now limited to the 2013-2014 income before the 5th April?

I don't have my 75th until February 2016, so could contribute from this years income and next, after 6th April

redbuzzard

If you are still with HL I suggest you call them; they are very good at guidance (or they were last week!) and they will be able to tell you whether you need to draw any income (as opposed to just TFLS) this year to keep the AA for next year - that's a nuance I hadn't picked up on, or if I did it wasn't relevant and I have forgotten already!

Some guidance here:

http://www.hl.co.uk/pensions/income-drawdown/comparison

If you do need to take actual income then their payment run is next Friday.

I see no reason why you couldn't carry forward last year's annual allowance BUT you can NOT contribute more than your earned income for the current year - it's the lower of the earned income and the Annual Allowance. Neither can you use tax relief from previous years.

If this is complete rubbish somebody will correct me - I'm not a real pension lawyer.

I spoke to three different people at HL on the SIPP & Pensions number 0117 980 9926, all were very up to speed as you would expect, so I should give them a call first thing.(This isn't an advert for HL, as far as I can recall Senior Sam's SIPP is with them).

SeniorSam

redbuzzard ..... thanks, you are correct, I am with HL, but only thought of adding to the pot last night and thought I may get some answers on this forum as I'm not up to speed on the pensions front.

In fact I have just noticed an error in that although I thought I had not started drawdown from the crystalised sum, one payment was made last June. The overall pot has been growing well month by month and didn't notice the £5k withdrawal, or had forgotten about it.

Does that affect any input I wish to make, or does it not make any difference.

I will be calling HL on Monday when they open up again.

redbuzzard

SeniorSam wrote: »

In fact I have just noticed an error in that although I thought I had not started drawdown from the crystalised sum, one payment was made last June.

Does that affect any input I wish to make, or does it not make any difference.

It means the 'nuance' I referred to about whether taking only the TFLS vs. TFLS + some additional drawdown is irrelevant.

My understanding is that you will be able to add to your SIPP and continue under capped drawdown with the existing crystallised pot and keep the £40k AA indefinitely - though the £40k may not matter to you if your earnings are c. £10k, and I assume you will not wnat to contribute after age 75 as there is no tax relief, unless that once-mooted change went ahead without my noticing.

Confused? You will be!